Appeal from the 118th District Court, Glasscock County, Texas
Trial Court Cause No. 1695-A
consists of: Willson, J., Bailey, J., and Wright, S.C.J.
M. BAILEY JUSTICE
appeal concerns the statutory liability under the Texas
Natural Resources Code of a producing oil and gas
operator/lessee to make royalty payments directly to lessors
with whom the producing operator/lessee did not have a lease.
The trial court determined that the producing operator/lessee
was not responsible for paying royalties directly to the
lessors with whom they were not in contractual privity. We
Jean Hester leased her undivided one-third mineral interest
in the subject land to Apache Corporation, reserving a 25%
royalty interest. The remaining mineral interest owners
(hereinafter the Lessor Plaintiffs) subsequently leased their
combined two-thirds mineral interest to Devon Energy
Production Company, L.P. The Lessor Plaintiffs also reserved
a 25% royalty interest.
and Devon attempted to negotiate terms for a joint operating
agreement for the joint development of the mineral estate.
However, they were unable to agree to terms. Apache
subsequently drilled seven producing oil and gas wells on the
subject land. After Apache recovered its costs associated
with production and drilling, Apache paid Devon its
two-thirds share of the net revenue to which Apache believed
Devon was entitled as Apache's cotenant in the mineral
Lessor Plaintiffs filed suit against both Devon and Apache.
The Lessor Plaintiffs alleged that Devon failed to pay the
Lessor Plaintiffs "all royalties due" under their
leases. The Lessor Plaintiffs also alleged that Apache failed
to pay them royalties pursuant to Section 91.402 of the Texas
Natural Resources Code. See Tex. Nat. Res. Code Ann.
§ 91.402(a) (West Supp. 2017). Devon denied all of the
Lessor Plaintiffs' allegations and filed a cross-claim
against Apache in which it asserted that Apache owed royalty
payments directly to the Lessor Plaintiffs under Section
91.402 of the Natural Resources Code.
parties moved for partial summary judgment on the issue of
which party owed royalty payments to the Lessor Plaintiffs.
The trial court granted the Lessor Plaintiffs' motion for
summary judgment against Devon and denied their motion for
summary judgment against Apache on the issue of royalty
payments. The trial court also denied Devon's motion for
summary judgment against Apache and granted Apache's
motion for summary judgment against Devon on the issue of
the Lessor Plaintiffs settled their claims against Devon, and
the trial court dismissed those claims. The parties then
moved to sever Devon's cross-claim against Apache into a
separate suit, which the trial court granted. The trial court
then entered a take-nothing final judgment in Apache's
favor, in which the trial court found that "Apache is
not obligated under the Texas Natural Resources Code to pay
royalties to [the Lessor Plaintiffs] on oil and gas
proceeds" from the wells that Apache drilled.
single issue on appeal, Devon argues that the trial court
erred when it granted Apache's motion for summary
judgment, denied Devon's motion for summary judgment, and
entered a final judgment in Apache's favor on the issue
of which party owed royalty payments to the Lessor
Plaintiffs. Devon asserts that the trial court erred because
Section 91.402 of the Natural Resources Code mandates that
Apache directly pay the Lessor Plaintiffs royalty payments
due under the leases between Devon and the Lessor Plaintiffs.
court must grant a motion for summary judgment if the moving
party establishes that no genuine issue of material fact
exists and that it is entitled to judgment as a matter of
law. Tex.R.Civ.P. 166a(c); Lear Siegler, Inc. v.
Perez, 819 S.W.2d 470, 471 (Tex. 1991). In order for a
defendant to be entitled to summary judgment, the defendant
must either disprove an element of each cause of action or
establish an affirmative defense as a matter of law. Am.
Tobacco Co. v. Grinell, 951 S.W.2d 420, 425 (Tex. 1997).
review the granting of a motion for summary judgment de novo.
Natividad v. Alexsis, Inc., 875 S.W.2d 695, 699
(Tex. 1994). When reviewing a summary judgment, we consider
all the evidence and take as true all evidence favorable to
the nonmovant. Am. Tobacco, 951 S.W.2d at 425;
Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548-49
(Tex. 1985). Additionally, statutory interpretation ...